The headline numbers from August show UK inflation steady at 3.8 percent. No change from July, but still almost twice the Bank of England’s target. For shoppers and households, food costs are rising again, pushing strain into everyday spending.
The new figures come from the Office for National Statistics. They confirm the UK’s inflation is holding flat, but the breakdown tells a sharper story. Food and non-alcoholic beverages are now up 5.1 percent year on year. That is the fifth month in a row of increases, and the highest since the start of last year.
Inflation Flat, But Pressure Shifts
Holding at 3.8 percent means no surprise for markets, since most economists had predicted the same. Still, flat headline inflation doesn’t mean costs are easing. In fact, some categories are still moving up fast. Food is top of the list.
The UK continues to sit at the upper end compared with major economies. In the eurozone and the United States, inflation is running lower. Britain’s rate stays the highest, and that makes the UK an outlier among its peers.
Food Prices Leading the Climb
Food is the one area shoppers feel straight away. The August ONS release shows a 5.1 percent rise against last year. In July, the rate was 4.9 percent. That extra step might look small, but it marks five straight months going higher.
Fruit, vegetables, meat, dairy – all continue to show pressure. While the ONS data doesn’t spell out every detail in the headline note, the broad signal is clear. Food is not coming down, and supermarkets are passing those costs across.
It matters because food inflation eats into every household budget. And it hits lower-income families hardest, since they spend a bigger share of income on groceries.
Core Inflation Dips Slightly
The ONS also reported core inflation dropping back a little. That measure, which cuts out energy, food and tobacco, was at 3.6 percent in August. In July it was 3.8 percent.
A small drop, yes, but still above the central bank’s comfort zone. The Bank of England targets 2 percent across the board. At 3.6 percent, core inflation is showing some easing, but it remains well above goal.
Services Inflation Cooling
Inflation of services is another meter that is dense. In August, this agent increased from 5.0 per cent to 4.7 per cent in July. A slight decline, although services are still a strong driver for general inflation.
This suggests a certain relief in some consumer categories – restaurants, travel, holidays – although costs still run more than before the years of epidemic.
Housing Costs Stay High
The August report has another important line house. The cost of housing of the owner’s inhabitants increased by 5.3 per cent of the year. This is just one notch below 5.5 percent of July.
This means that hostage, rent and related housing expenses are one of the heavy weight in inflation curves. Even with low heading inflation, high housing costs limit a relief for most homes.
UK Outlier Against Peers
Given the eurozone, inflation is soft. Even in the US, the rate is low. 3.8 percent of the UK’s 3.8 percent of it holds it at the top of the table among advanced economies.
Why the UK is highly discussed. Some energy points to contracts, other food impairment costs and some to be sticky to services. ONS does not explain data causes. But the difference is real, and that makes monetary policy more complex.
Central Bank Policy Outlook
With the Bank of England interest rate at 4 percent, the decision for this week is expected to “not change”. Analysts do not yet expect cuts or hiking.
The logic is simple: The headline inflation is not transmitted, the food inflation is high, the services are still strong. Until the number comes close to 2 per cent, it is unlikely that political policy makers are easily in prices.
Therefore, the cost of loans remains still fixed. It goes back to housing costs and commercial loans. It also puts pressure on retail, where financing and operating costs remain high.
Impact on Households
For families, the August figures mean food is taking more out of the budget, housing costs are still heavy, and services aren’t cheap either.
Yes, core inflation eased a little. But most people don’t calculate core. They see the price of bread, fruit, meat, milk. And those items are still up.
Supermarkets face tough choices as well. They can try to hold prices, push more promotions, or pass through costs. The fifth straight month of food inflation suggests many are still passing them on.
The Rest of 2025
Looking ahead, much depends on whether food inflation can slow. Supply chains, harvests, global trade – all will play a role.
The risk is that if food stays high, overall inflation could get stuck near 4 percent for longer. That would make it even harder for the Bank of England to bring rates down.
Energy and fuel prices will also matter as winter approaches. A mild season could help, but that’s not something anyone can plan on.
For now, the outlook is slow improvement at best. Inflation is off the double-digit highs of 2022 and 2023, but at 3.8 percent, still too sticky for comfort.
Conclusion
The August ONS data confirms UK inflation steady at 3.8 percent. No movement from July, but food prices jumped to 5.1 percent, their highest since early 2024.
Services and core inflation eased a little, and housing costs stayed firm. The UK still has the highest inflation among major economies, nearly double the Bank of England’s target.
With rates expected to hold at 4 percent, the central bank waits for a clearer fall. Until then, households carry the weight of higher food and housing costs. For now, the headline is simple: UK inflation steady while food costs keep rising.
